An Increase in the Expected Price Level Shifts the

question 20

Multiple Choice

An increase in the expected price level shifts the

• A)short-run and long-run aggregate supply curves left.
• B)the short-run but not the long-run aggregate supply curve left.
• C)the long-run but not the short-run aggregate supply curve left.
• D)neither the long-run nor the short-run aggregate supply curve left.

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Definitions:

Inelastic Demand

Demand that responds somewhat, but not a great deal, to changes in price. Inelastic demand always has a numerical value between zero and 1.

Zero Profits

A situation where a firm’s total revenues are exactly equal to its total costs, leading to no net profit or loss.

MC = ATC

This is the point where Marginal Cost equals Average Total Cost, typically illustrating the most efficient scale of production in the short run.

Perfectly Competitive

A market structure characterized by a large number of small firms, identical products, and free entry and exit, which leads to firms being price takers.